Let's Talk Bitcoin, episode 46, "Life in the Cloud"

8/13/2019 Let's Talk Bitcoin, episode 46, "Life in the Cloud"

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Lets Talk Bitcoin

E46: Life in the Cloud

Participants:

Adam B. Levine ABL! " #ost

Andreas $. Antonopoulos AA! " Co%host

&r. 'tephanie $urph( '$! " Co%host

Benn( " B! ")uest * Cloud#ashin+.com Admin

Emmanuel % E! " )uest * Cloud#ashin+.com Admin

,-T/ $0',C!

ABL: #ello1 and 2elcome to episode 46 of Lets Talk Bitcoin for /cto3er st1 57.8isit us at letstalk3itcoin.com for our dail( +uest 3lo+1 all our past episodes and1 ofcourse1 tippin+ options. 9ell 3e in Atlanta for their Cr(ptoCurrenc( Conference1*7*57 " *6*57. ,f (oure +oin+ to 3e there1 3e sure to visit

letstalk3itcoin.com*meetup and sa(1 #i.;


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'$: There 2as a scam recentl( on Local Bitcoins that 2as +oin+ around and1 ofcourse1 Local Bitcoins is not free from scammers ?ust like an(2here in the Bitcoin2orld. But1 this 2as a scam that hadnt reall( 3een pulled off 3efore and 2hat 2as

+oin+ on 2as there 2as a user 2ho 2as messa+in+ sellers on Local Bitcoins andsa(in+1 #e(1 (ou kno21 , have lo2 feed3ack 3ut ?ust to put (our fears at ease ,msendin+ (ou a picture of m( passport photo1; and there 2as an attachment to themessa+e. uirin+ apicturet2o forms of +overnment ,&1 or 2hatever. Theres a red fla+ ri+ht there.#o2ever1 some people clicked on the picture and 2hat happened 2as it took (outo a ver( 3lurr( lookin+ scan of a passport photo 2here (ou couldnt see an(details an(2a(1 3ut it 2as meant to distract (ou from the fact that all of (our3itcoins on (our Local Bitcoins 2allet 2ere 3ein+ stolen. chucklin+!

AA: /uch.

'$: And 2hat happened 2as1 this someho21 clickin+ on this picture " and , dontkno2 e=actl( the computer science%(; details1 3ut 3asicall(1 2hat happens is if(ou click on this attachment and! open it in the same 2indo2 as (our LocalBitcoins 2indo21 it e=ecuted a Davascript that 2ould initiate a 2ithdra2al from(our Local Bitcoins 2allet.

AA: Thats kno2n as a cross%site scriptin+ attack or ''. Thats 3asicall( 2hensoft2are runnin+ in one of (our 2indo2s or ta3s is attackin+ soft2are thats

runnin+ in another one of (our 2indo2s or ta3s. ,n this case1 the passportDavascript Tro?an1 essentiall(1 is attackin+ the Local Bitcoins ta3.

'$: i+ht. 'o1 a lot of sellers on Local Bitcoins keep their coins in their 2allet onLocal Bitcoins 3ecause1 3asicall(1 from there its prett( eas( to fund escro2s thatlater +o into transactions. 'o1 its convenient to have 3itcoins alread( loaded intoLocal Bitcoins for the purpose of tradin+1 3ut in this case1 this person e=ploitedthat fact. -o21 there is a 3ri+ht side to this. /f course1 2e can learn from thisattack: dont click on an( attachments in Local Bitcoins1 ri+ht1 and 2atch out forDavascript. Those are the t2o lessons , think 2e can take from this. But1 LocalBitcoins has a securit( feature called t2o%factor authentication 2hich (ou can use

2ith! an app like )oo+le Authenticator1 2hich creates tokens that e=pire ever( 7seconds. ,n order to lo+in or 2ithdra2 3itcoins from (our account1 (ouve +otenter the token and the token is on another device1 perhaps1 like (our cell phoneor somethin+ or a different computer. ,ts a little 3it of a 2a( to ensure that (ouare actuall( the person 2ho o2ns the account and (oure approvin+ an(2ithdra2als that happen. ,n m( mind1 this is a 3i+ plus in the column of t2o%factorauthentication1 and also1 ?ust 3ein+ reall( careful and 2atchin+ out for scammers


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and 3ein+ super%skeptical of an( kind of attachments like that on a site like LocalBitcoins.

AA: Lets tr( some advice for securit( ne23ies 2hen it comes to Bitcoin.


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online. ,d rather have 5J of (our mone( on online and not use t2o%factorauthentication.

ABL: 'o1 t2o%factor authentication improves the situation 3( makin+ it so thatsomeone has to compromise t2o separate devices or t2o separate vectors as

opposed to 3ein+ a3le to ?ust stum3le across one1 compromise that one1 and takeever(thin+ (ou have. Thats the advanta+e. ,t doesnt make it impossi3le to havemone( stolen from (ou it ?ust makes it so that its more comple=.

AA: ,t makes it so that the one%factor that most people use1 2hich is somethin+1(ou kno2 % the pass2ord. The pro3lem is that can 3e ver( easil( captured from a2eak endpoint throu+h a ke(lo++er. The advanta+e of havin+ a token like )oo+leAuthenticator is that its much harder to 3reak into that. )enerall( speakin+12hen (ou see compromises that involve t2o%factor authentication1 its 3ecausethe service itself 2as 3roken. There 2as a 3u+ some2here else or in the last case2e sa2 in 2as a -) +eneratin+ poor >ualit( si+natures1 3ut effectivel(1 , dont

think 2eve ever seen a service protected 3( t2o%factor authentication 2heresome3od(s had the second factor compromised. ,f (ou use it ri+ht1 it is secure.

'$: There is a small cost to usin+ it thou+h1 ri+ht1 and that is that if (ou use t2o%factor authentication1 it can take a little 3it of e=tra time and effort. ,ts not reall(as thou+h theres another pass2ord to lose 3ecause all (ou reall( need to do is 3ea3le to have access to )oo+le Authenticator1 or (our u3i@e(1 or 2hatever. ,ts notlike theres an e=tra thin+ to for+et like a pass2ord1 3ut it is an e=tra step and an(time (ou introduce an e=tra step theres somethin+ else that could potentiall( +o2ron+.

AA: i+ht1 a3solutel(. Thou+h1 , think 2hat 2ere seein+ a+ain and a+ain the lessonis that 2ithout t2o%factor authentication1 mone( stored in an online account12hether thats $t. )o=1 or Coin3ase1 or Local Bitcoins1 or an( of them reall(1 isnot safe. ,ts not safe 3ecause these companies are not doin+ a +ood ?o3 2ithsecurit(. The(re doin+ a relativel( +ood ?o3 2ith securit(. ,ts not safe1 simpl(3ecause (our computer is not safe1 and no one can protect a+ainst that e=cept fort2o%factor authentication. 'o1 the pro3lem here is that the endpoints are 2oefull(insecure and 2eve reached a point in societ( 2here 2e have invented the di+italcurrenc( that can 3e stored on an(thin+ 3ut 2e havent (et invented an(thin+that can store di+ital currenc( securel(.

ABL: This kind of 3rin+s us naturall( into the topic of hard2are 2allets 2hich1there have 3een a fe2, think ,ve seen one po2ered 3( a asp3err( Pi and ,kno2 that theres a concept floatin+ around called the TreKor that actuall( isslated to ship at the end of /cto3er.

AA: ,ve pre%ordered and ,m e=pectin+ to receive t2o of those. As soon as , +etthem1 ,ll let (ou kno2.


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ABL: 9hat is it that a hard2are 2allet does that is su3stantiall( different fromAhard2are 2allet is not t2o%factor authentication: a hard2are 2allet is a distinctdevice that is onl( for Bitcoin and1 therefore1 can 3e treated as a secureenvironment1 ri+htI

AA: 9ell1 a hard2are 2allet could 3e t2o%factor authentication or % a hard2are2allet1 essentiall(1 is a second factor in the authentication scheme. #o2ever1 atrue hard2are 2allet is one that processes transactions. 'o1 it si+ns stuff. ,t haske(s on it. , think thats reall( the issue is 3ein+ a3le to store ke(s in a tamper%proof environment that can 3e controlled 3( the user and usuall(1 2hen (ou havea hard2are 2allet it has another factor. ,ts not that! the one factor is 3etter thanthe other its that t2o factors are 3etter than one. ,f (ou have a hard2are 2allet(ou still need the P,- or pass2ord to protect that hard2are 2allet. /ther2ise1 it+ets stolen1 so does (our mone(.

ABL: , see1 so its ?ust that the device in that case is a factor and the other

AA: E=actl(.

ABL: ok1 , see1 , see.

AA: The device is the somethin+ (ou have and (ou need the second factor 2hich issomethin+ (ou kno2 and if it had a fin+erprint scanner1 (oud have a third factor2hich is somethin+ (ou are.

ABL: /ne of the natural thin+s that comes up 2ith either a hard2are 2allet or a

second device used in a t2o%factor authentication schemeF 2hat happens if ,m ona 3oat and , lean over the side and m( phone falls out of m( pocket and then1 m(phone is +one and thats m( second authentication device. ,ts not like , can ?ustload )oo+le Authenticator on another one of m( devices. ,t 2as tied to thatspecific device1 ri+htI

AA: eah1 (oure +oin+ to have to +o 3ack and use the reset mechanisms on eachone of those sites to reset the t2o%factor authentication s(stem1 and usuall(1 that2ill involve providin+ some other proof of proof of identit(. Then1 it +ets into themanual process and its not eas(.

ABL: &o (ou think that this is1 , mean % the direction that 2ere +oin+ no2 2here2ere essentiall( addin+ additional la(ers to tr( and make it so that (ou cant ?ust+et throu+h one la(er and 3e there. &o (ou think that this is the correct directionto +oI , had a conversation 2ith Deffre( Paul a couple months a+o 2here he toldme a3out 'neaks La21 2hich is that users cannot or 2ill not adhere to operationalsecurit(1 3asicall(. The(! 2ill not secure their computers 3ecause the( eithercant or the( 2ont.


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AA: Thats a3solutel( true so the 2a( (ou resolve that is (ou take operationalsecurit( and (ou 2eave it into the normal 2orkflo2 or function that the user isdoin+ so that the( dont kno2 the(re doin+ operational securit(: the( simpl( doit. , think in the case of these hard2are 2allets1 2hat (oure doin+ is (ouremakin+ the t2o%factor aspect disappear of it into the 3ack+round 3ecause (ouve

ph(sicaliKed the mone( and provided a second factor at the same time. B( hidin+the securit( 2e can +et users to adopt it1 3( makin+ it a part of the normalinteraction of mone(1 so (ou appl( the securit( 2ithout even kno2in+ it1 is ?ustpart of the cultural norm or the protocol if (ou like.

ABL: 9ell1 , look for2ard to hearin+ 2hat (our thou+hts are on the TreKor 2alletonce (ou +et (our hands on it1 Andreas. That sounds prett( e=citin+.

AA: eah1 ,m lookin+ for2ard to it and (ou kno21 2hats interestin+ a3out this isthat these devices are reall( ena3led 3( this parallel revolution thats happenin+in amateur hard2are1 in the a3ilit( to take an /LE& screen and a asp3err( Pi or a

small microprocessor and thro2 somethin+ to+ether like the TreKor 2ith some 7&printin+. ou couldnt reall( do that ten (ears a+o. , think its reall( e=citin+ ho2those spaces are conver+in+ 2ith Bitcoin.

ABL: Dust as in a side here1 Chris A3rams ?ust 5MN1MO refunded from B


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AA: , think thats reall( the ar+ument that uidit( of the market anddismisses dru+s and +am3lin+ as illi>uid1 lackin+ in velocit(1 lackin+ in stickiness1lackin+ in true value. #e +oes on to talk a3out1 9hat a3out ne2 products andservicesI; B( the 2a(1 , am horri3l( paraphrasin+ and pro3a3l( 3utcherin+ hisar+ument1 and o3viousl(1 , disa+ree. The 3ottom line is that hes talkin+ a3out the

market 3ein+ overvalued 3( t2o orders of ma+nitude.

ABL: , think that this is ho2 markets 3ehave. $arkets look to the future and sa(1/k1 2ell1 its not a3out 2hat its 2orth toda(1 its a3out 2hat its +oin+ to 3e2orth later.; /3viousl(1 the price that 2e have no2 takes into account a lot ofpeople 2ho have 3ou+ht 2ith the idea that the(re holdin+ as an investment. ,think that its hard to make the ar+ument that its not ?ustified 2hen so man(people are usin+ it as a means of savin+s. , think that savin+s has its place in as(stem like this and its not manipulation or speculation even1 reall(. ,ts savin+s.

AA: es. Basicall(1 , could take this e=act article and do search and replace;

Bitcoin; for +old1; and 3ased on


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that there 2ill ever 3e in e=istence1 and look at the 2orld population1 and look atthe percenta+e of the 2orld population 2ho are Bitcoin users1 currentl(1 and thepotential for ne2 users.; And suddenl(1 (ouve +ot 1 3itcoins1 for oneBitcoin. The price of a 3itcoin is 2hat some3od( is 2illin+ to pa( for it. 9eve saidthat over and over a+ain on this sho2. There are lots and lots of people

determinin+ that price ever( moment of ever( da( throu+h Bitcoin tradin+13u(in+1 and sellin+. Thats the current spot price1 the market price1 thats 2hatthe price is.

AA: Part of tradin+ on that price is readin+ articles 3( uestion.

AA: Lau+hin+!

ABL: es1 in 3oth 2a(s.

AA: 9as that a GE t2o pun or GE four pun!1 2herever 2ere at no2I

ABL: ,t 2as accidental1 3ut (es1 indeed. #o2 2e +et the price in Bitcoin an(2a( it+oes is a totalits like a 3lack 3o=1 ri+htI $t. )o= has one price. 9hen , 2astalkin+ 2ith Dosh ossi1 hes talkin+ a3out his Button2ood soft2are and ho2 he2ants to essentiall( collect prices from all of the 'atoshi '>uares live1 that are+oin+ on ever(2here all the time and also Local Bitcoins and use that as a 2a( toa++re+ate and +enerate a spot price. eall(1 2ith conventional markets1 (ou haveto use these 3road measures. ou have to pa( attention to the entities like $t.)o= 3ecause the(re 2here all the tradin+ happens1 3ut in a decentraliKed


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net2ork1 and especiall(1 a decentraliKed net2ork like 2e have 2ith Bitcoin1 2herere+ulation is constantl( spreadin+ out. uantitative anal(sis that needs to 3e done in terms ofvalue of that market 3ecause 2e dont have the tools.

Advertisement Q 'tart!


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Deffre( Tucker: #ello1 ,m Deffre( Tucker1 Bitcoin enthusiast and host of theupcomin+ Cr(ptocurrenc( conference in Atlanta1 )eor+ia % /cto3er Oth. 9eve +ota marvelousl( li3ertarian%infused da( of discussion a3out 2hat is indisputa3l( thefuture of mone( and (ou are invited. uestion that , have is: is there still an opportunit( inminin+I ,t seems like the cost of participatin+ in that net2ork is +ettin+increasin+l( hi+h and the time%frame to actuall( recoup (our investment is +ettin+even smaller.

E: ,f (oull allo2 me to ans2er that >uestion1 its Emmanuel speakin+ here.A3solutel(1 2hat 2ere seein+ is a 3it of a shift in the usual mindset of miners2here the( used to /, in the space of t2o to four months1 dependin+ on deliver(.

9ere seein+ that shift to2ards the latter end of the calendar. &ependin+ on 2hen(ou receive (our hard2are and dependin+ on 2hen (ou made the purchase1 thenet2ork difficult( could have literall( overtaken (ou. ,n terms of1 is it profita3leto mineI; 9ed sa(1 a3solutel(1 it is profita3le1 its still profita3le to mine. ,tdepends on (our strate+(. ,t depends on (our capital and it depends on 2ho (oudecide to partner 2ith to 3e successful. ,f 2e look at 2hat people have 3een doin+in industr( as thin+s stand no21 people 2ill 3e makin+ orders from the four ma?ormanufacturers. There 2ill 3e more comin+ online soon. The( 2ould 2ait a period


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of three to four months. 9hat our model is and the 2a( in 2hich 2eveapproached that is to essentiall( use economies of scale to our advanta+e topurchase a lar+e amount of hashin+ po2er and then1 to redistri3ute that tocustomers. 9e 2ill 3e1 pro3a3l(1 one of the first companies to literall( ena3le (outo lo+ on and make a purchase of hashin+ po2er and to 3e minin+ 2ithin ten

minutes. Thats a complete shift from 2hat the market is used to and , think thatthats a model for (ears to come. Another thin+ as 2ell is1 people sa( that themone( to 3e made in minin+ is 2ithin the first t2o to three months. 9ell1 that istrue1 dependin+ on 2hat (our model is 3ut also1 if (ou have the a3ilit( toconsistentl( or constantl( add to the armor( of (our hashin+ po2er that (ou have1it +ives (ou a much 3etter stance to prett( much fi+ht the net2ork difficult( and(ou cant do that as a solo miner. The 2hole market is +oin+ to shift. 9e 3elieveminin+ 3elon+s in the cloud ?ust as supercomputin+ does. 9eve 3een pioneers inthat field and 2e 3elieve its prett( much the 2a( to +o.

ABL: Lets 3ack up for a second here. Can (ou tell me ho2 (ou +ot into the space

and if (ouve had an( ventures in Bitcoin thin+s 3eforeI #ave (ou 3een minin+3efore (ou +ot into this Cloud #ashin+ 3usinessI

E: /h1 (eah. , started off minin+ 2ith m( CP0 2hen it 2as interestin+. Then1 , +ot3ored of it. Then1 , kind of left it alone. Then1 the )P0s came into 3usiness and ,+ave that a 3it of a +o. Then1 m( 2ife started +ettin+ a 3it anno(ed from the heatand the noise and the lack of spare room 2hen people came to visit. 'o1 , kind ofparked the minin+ pro?ect to the side a 3it. 9hen A',Cs came online1 , thou+htma(3e , could venture there 3ecause the hard2are 2as smaller1 it 2as supposedl(less nois( and (ou could +et more densit( out of it. As time elapsed1 more people3ecame interested. 'o1 , 3e+an actuall( sellin+ o2nership of the machines to

friends and famil( 2ho 2ere interested in Bitcoin ?ust to 3e a3le to +ive them thea3ilit( to do so. ,d mana+e it. The(d ?ust have to pa( the 3ills. That 2as theinitial Cloud #ashin+ model and it 3urst itself onto the ,nternet in April of! this(ear. 9e started sellin+ contracts online and the rest is histor(. 9e prett( much+re2 or+anicall(1 from runnin+ minin+ e>uipment in the 3edroom1 to runnin+ anor+aniKation no2 2ho have 17 individual customers.

ABL: Alri+ht1 sound like (ouve made some prett( fast inroads into the space. Letstalk a3out minin+ for a second. The point of minin+1 , 2ould ar+ue1 is toincentiviKe the distri3ution of the Bitcoin net2ork to the +reatest e=tent possi3le13ut in the fe2 (ears that 2eve +one from 5 to the point that 2ere at no21

that reall( hasnt 3een the e=perience. ,t seems like1 3ecause 2eve +one so fastthrou+h the +enerations of hard2are1 its 3een ver( difficult for people to keepup1 and essentiall(1 2here a couple of (ears a+o1 (ou could mine 2ith (our CP0 as(ou started out1 no2 someone 2ho 2ants to e=perience it for the first time ?ust atthat sort of curiosit( level doesnt have an(thin+ like that1 doesnt have an(thin+near like that. our service aside1 2hat do (ou think of this trend1 +enerall(speakin+I ,f (ou hadnt 3een a3le to access it in the 2a( that (ou did1 do (ou thinkthat (ou 2ouldve started minin+I


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B: eah1 ,ll +o into this a 3it. The advent of CP0 minin+ 2as1 essentiall(1 as mostpeople involved in Bitcoin minin+ are a2are1 to verif( the transactions on theBitcoin net2ork and incentiviKe people to 3e connected to the Bitcoin net2ork.The entr( into that market 2as lar+el( in the tech field in the 3e+innin+ 3ecausethe confi+uration of minin+ soft2are 2as not e=actl( user%friendl( or ease of entr(

2as >uite hi+h for the avera+e individual that doesnt have 3ack+rounde=perience 2orkin+ from a console or somethin+ of that sort. ,n the 3e+innin+1people started developin+ )0,s to make it easier to 3e+in to confi+ure a minin+%platform soft2are pro+ram and then1 from there1 it 3e+an to scale to moresophisticated tools and no21 monitorin+ tools and thin+s of that sort. But1 it stillhas a lar+e learnin+ curve for people and so1 one of the ideas that 2e had in theCloud #ashin+ model 2as1 ho2 do 2e ease the entr( point into minin+ and at thesame time help people understand 2hat Bitcoin minin+ is and 2h( its stilladvanta+eous to the Bitcoin net2ork that people still are minin+ 3itcoins. Theincentive is there. People dont necessaril( mine ?ust 3ecause the(re spirited to3e miners. The( do 2ant to 3e re2arded. The lon+%term plan for Bitcoin 2as that

people 2ere +oin+ to 3e minin+ 3ecause the(re re2arded on the transactions thatare takin+ place in the 3lockchain. ,n essence1 (ou are still incentiviKed in five(ears or! ten (ears time. To +et into that market as an individual that is lookin+to +et familiar 2ith minin+ and ?ump into it1 its not as simple as ?ust1 +odo2nload a pro+ram and start runnin+ on (our CP0; if it 3ecomes >uickl( evidentthat theres no re2ard there for (ou. 9e 2anted to make it possi3le for people tounderstand that the re2ard is still there1 (ou ?ust have to 3e a3le to see ho2 to+et to it. The Cloud #ashin+ desi+n is to 3e a3le to a3le to 3rin+ a person intominin+1 sho2 them that theres an estimated /, that is potential1 and then thattheres a difficult( that (oure runnin+ up a+ainst. 9ere tr(in+ to make some ofthis more transparent to people that are 2alkin+ into this and +oin+1 /h1 minin+1

this makes sense. Dust thro2 some machine on and , should 3e makin+ mone(.;9ell1 2ith the cost of po2er versus the difficult( risin+ and the amount ofe>uipment (ou need to overcome those costs. 9e 3elieve that theres a scala3lemodel that can 2ork and 2eve implemented that into the 3usiness model ofCloud #ashin+ to 3enefit the customers. 0ltimatel(1 2e have a +oal of 3enefitin+the Bitcoin net2ork alon+side that.

ABL: ,t seems like one of the 3i++est challen+es that (ou run up a+ainst in minin+1ho2ever (oure +oin+ to do it1 is not necessaril( the fact that the difficult( is+oin+ up so much as it is ho2 (oure timin+ (our purchases relative to the rest ofthe 2orlds release schedules 3ecause no2 there are several manufacturers in the

space.

E: /3soletion1 (eah.

ABL: eah1 so if (ou +et a 2hole 3unch of hashin+ po2er in the 3e+innin+ then1t2o da(s later theres a +iant release and suddenl(1 (oure s2ept a2a(. #ave (ou3een a3le to counter that riskI


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difficult( increases1 ho2 do (ou deal 2ith customers 2orried a3out the da(%to%da(1 2ell1 sorr(1 the 3i%2eekl( difficult( increases and ho2 do (ou prett( muchkeep them motivated to mine or to keep them motivated tothe(ll kno2 thatthe(ll actuall( +et an /,. 9hat 2e do is 2ell essentiall( onl( sell up to 6J ofan( capacit( that 2e have. At the end of each month1 2hat 2e do is 2e purchase

on the 3ehalf of the clients1 that hashin+ po2er that 2e have as a reserve1 so thatthe( +et an increase in hashin+ po2er so that it allo2s them to either sta( onlineor at least not feel the mass effect of the difficult( on their returns. Thats a3etter model than sittin+ on a piece of hard2are that ever( t2o 2eeks the returnsare droppin+ 3( 5%7J. Thats the model 2eve adopted and thats the model themarket 2ill 3e used to. Thats 2hat 2eve 2orked out 2ith talkin+ to customers1+ivin+ them an idea of the kind of thin+s that tick them off and tr( to adapt to theneeds of the customers on our front.

B: ,ll also comment on the net2ork hash rate unpredicta3ilit( that a lot of minersare seein+. This is clearl( a risk that miners are takin+ 2hen the(re 3u(in+

hard2are on the market that has the pre%order 3asis. 9eve often said to peoplethat its a lot easier to look at the net2ork hash rate to determine 2hat (ourpotential return is 3ecause the net2ork hash rate is in flu= on a constant 3asis12hereas (our difficult( chan+es are 3uilt into the al+orithm of the Bitcoin desi+nand so1 if (oure in the kno2 in terms of research and discussin+ and findin+ out2hat the suppl( chain challen+es are of various manufacturers1 its a little easierto predict 2hat the net2ork hash rate mi+ht look like at a certain point in time ina +iven period. 9e dont kno2 in a (ear from no21 3ut 2e mi+ht 3e a3le to sa( inthree months1 3ased on these companies1 2e can someho2 +au+e that thenet2ork hash rates +oin+ to 3e 3et2een and . Then1 if 2e sa( that (our hashrate 2ith Cloud #ashin+ is this and that 3ased on our model1 the hash rate of (our

account 2ill increase 3ased on the estimates of the net2ork hash rate increasin+in a proportionate 2a(1 (ou have a 2a( of 3ein+ a3le to calculate1 2ith somede+ree of accurac(1 2hat (our /, could 3e. -o21 2e dont kno2 if a compan( is+oin+ to come out of the left field that no ones heard of and dump an enormousamount of hashin+ po2er onto the net2ork1 perhaps an A',C manufacturer thatno3od( sa2 comin+. Thats al2a(s a possi3ilit(. Theres nothin+ an(one can reall(do to prevent those kinds of thin+s happenin+ e=cept for 3e prepared. That kindof preparation that 2e take is in the accumulation of +ood 3usiness partnerships2ith A',C manufacturers that 2ant to support not ?ust us1 3ut the fact that 2e areredistri3utin+ this hashin+ po2er to the customers. This is a reall( ke( point inone of the reasons 2h( A',C manufacturers have 2orked 2ith us so closel(:

3ecause the( 3elieve in the 3usiness model that 2e have. 'ure1 theres a lot ofcompanies that ?ust 2ant to make a profit. Theres a lot of individuals that ?ust2ant to dump a lot of mone( into minin+ hard2are and immediatel( mine forthemselves. 9e +et that. 9e understand that theres al2a(s +oin+ to 3e thatmarket out there 2here theres people that are ver( 3ull on the lon+%term ofBitcoin. The(ll put mone( into minin+ and take the risks1 3ut the attitude thatour customers have is that Cloud #ashin+ is +oin+ to support them and that themanufacturers are +oin+ to support Cloud #ashin+ and1 in turn1 ever(one should


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3enefit. 9e found that the manufacturers 2ho understand our 3usiness model2ant to keep our customers in line 2ith the net2ork hash rate increases as muchas possi3le. The! reason 3ein+ is that1 like an( manufacturer1 (our +oal is not tosell a product to some3od( once1 its to sell a second and a third and a fourthtime. 9e 3elieve in the same model. 9e 2ant our customers to 3e return

customers1 repeat customers. 9e 2ant them to tell their friends that this is2orkin+ for them. uestions off of those t2o ans2ers. Lau+hin+!


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miner. #o2 2ould do that as an individual minin+ and ho2 could (ou ensure that(ou have the hard2are on the da( (ou 2ant the hard2are to start minin+ 2ithoutmakin+ a loss. ou couldnt do that as an individual unless (ou have a lot of capitaland a lot of patience. &oin+ it in the cloud +ives (ou that 3enefit 3ecause itsmana+ed on (our 3ehalf.

B: /ne of the thin+s that allo2s industr( to scale is to have a lot of people 3ackin+that industr( and 2e looked at that as part ho2 the model has to inte+rate. 9hen2e desi+ned Cloud #ashin+1 2e realiKed somethin+ that 2as ver( criticall(important and that is that its not all a3out ho2 much hashin+ po2er (ou have.The num3er1 specificall(1 isnt that important. ,ts a3out ho2 man( people are partof somethin+ that are collectivel( 2orkin+ to2ards a +oal. Because the Cloud#ashin+ customer 3ase is 2ell a2are that 2hen the( si+n%up1 this is somethin+that the(re si+nin+ into1 that is a collective initiative in a sense1 to 3e a3le toincrease the cloud minin+ capacit( for the 3enefit of all customers. Even thou+hits 7J as an individual1 that 7J +oes a lot further than that same 7J that (ou

2ould 3e takin+ in as an individual miner and then1 hopefull(1 takin+ that mone(and puttin+ it to2ards1 sa(1 (our ne=t purchase of an A',C 2hen (ou reach the /,point that (ou can no2 afford (our ne=t one. /n (our 3ehalf1 ever( month1 thisincrease is takin+ place. ,ts ad?usted in (our hash rate in our s(stem. ,ts visi3le to(ou as a client and (oure immediatel( minin+ 2ith that ad?usted hash rate as soonas soon as it takes effect1 2hereas1 as an individual miner thats 3u(in+ hard2are1(oure actuall( sittin+ and 2aitin+ for that hard2are to reach a /, point 2here(ou can no2 +o and 3u( the ne=t thin+. 9ith us1 thirt( da(s later or ho2ever1ma(3e less1 (ou have immediatel( taken some additional hash rate and put it into(our account and no2 (oure minin+ 2ith that. This is the a3ilit( to scale 2ith thenet2ork hash rate increase 3etter than 2aitin+ on the ne=t hard2are to sho2 up

at (our doorstep.

ABL: 'o1 , hear the decentraliKed ar+ument and , think that , a+ree 2ith (ou on thedecentraliKed ar+ument 3ut dont (ou1 as the service provider1 actuall( control allof theseI ,t seems like people arent actuall( minin+1 the(re more the recipientoutput. ,nstead of it +oin+ to (our 2allet it +oes to their 2allet.

B: i+ht. 'ure.

ABL: ,snt there a differentiationI &o the( choose 2hat pool the( participate in oris there an( controlI

B: 9ell1 ,m +lad (ou asked that >uestion. /ne of the thin+s that 2ill 3e rolledhere 2ith the ne=t 'eptem3er mine is the cloud hashin+ technolo+( 2hich is +oin+to offer a pool technolo+( to miners in a ver( innovative 2a(. ,tll 3e the firstmine that 2ere a2are of that allo2s people to 3oth mine in the cloud 3ased onthe Cloud #ashin+ model as 2ell as allo2in+ those customers1 as 2ell as othersthat are not customers of Cloud #ashin+1 to mine throu+h the Cloud #ashin+minin+ portal. That 2ill essentiall( make it possi3le for an(3od( that 2ants to


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mine 2ithin the Cloud #ashin+ cloud1 (ou mi+ht call it. 9ere kind of droppin+ thecloud 2ord a lot here 3ut it! allo2s people to access this cloud and 3e a3le toparticipate in it as 2ell. /n the topic of decentraliKation1 one of the stickin+points that has 3een often de3ated is 2hat makes it decentraliKed. ,f (ou 2ere1for e=ample1 a lar+e pool and 2eve seen this out there 2ith other minin+ pools.

9hat happens if (ou reach OJ of the net2orkI Theres a ver( common concernamon+st miners out there a3out the OJ attack potential that a minin+ operationcould achieve if the( had so much hashin+ po2er that the( could overtake thenet2ork and do 2hat the( call a dou3le%spend. /ne of the technolo+ies that 2ereimplementin+ into the minin+ desi+n that makes this ver( advanta+eous for thetechnical miner is the a3ilit( to select transactions that a person 2ants to mine2ithin our s(stem. This is somethin+ that 2e havent seen out there done 3efore3( other mines. This allo2s people to select the transactions and1 in essence1makes it a trul( decentraliKed model from the outsider connectin+ to our mine2hich means that1 in essence1 a OJ attack 2ould 3e hi+hl( unlikel( if not ne=t toimpossi3le. 9ere takin+ the po2er a2a( from ourselves and puttin+ in the hands

of people connectin+ throu+h our portal. ,ts 3ecome ver( commonplace no2 that2ere often asked 3( customers and en+a+ed 3( people in +eneral conversation inBitcoin a3out these Bitcoin minin+ calculators.


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million. 9ho kno2s1 ma(3e less. ,ts not, dont think the tool is meant fore=act calculations of 2hat hashin+ po2er is. ,t +ives people an indicative fi+ure13ut at the same time1 its deceptive 3ecause people dont kno2 2hat other factorsare necessaril( +oin+ to affect the +ro2th of the Bitcoin net2ork. uipment and (ou +et electricit( reall( cheap then (oucould run (our hard2are as lon+ as humanl( possi3le compared to havin+ anotherpiece of hard2are thats less efficient in a state like California 2here (ou mi+htnot +et the 3est ener+( rates. Thats one aspect. our strate+( could 3e 3ased on alon+%term strate+( 2here (ou could see that (ou ?ust essentiall( 2ant to hit (our/, 3ased on 2hat the costs1 2hat its costin+ (ou to run. Then1 theres anothermodel of1 Let me make as much mone( as , can in ne=t three or four months1 3u(as much hard2are as , can1 make m( /, and +o home.; The other model is kindof like our model is1 'ee it out for the ne=t t2o to three (ears1 make (our mone(

3ack tr(in+ to spread it over a three (ear period so that1 at least1 (ou can 3enefitfrom an( rises in that 2indo2 or space.; , do 3elieve that! ever(thin+s +oin+ to3e controlled ultimatel(1 3( price. ,f Bitcoin does not +et adopted then 2ereminin+ for no reason. ,f the adoptation (sic)continuall( +ro2s then 2ere +oin+ tosee hi+her and hi+her prices of Bitcoin. Even price has an effect on minin+. oufind suddenl(1 that people turned off their A',C that 2as decrepit1 a (ear ormore! a+o 2ould no2 decide to turn it 3ack on or their


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an( >uestions ?ust drop an email to infoSCloud#ashin+.com. 9ell 3e happ( tohelp.

ABL: 9ell check%in 2ith (ou in a3out si= months and see 2here the hash rate is.Thanks for ?oinin+ us on Lets Talk Bitcoin.

E: Thanks1 Adam.

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Lets Talk Bitcoin Promo " 'tart!

'$: oure listenin+ to Lets Talk Bitcoin1 the premier audiocast providin+ ne2sand insi+hts that cover the rapidl( evolvin+ 2orld of di+ital mone(. /ur t2ice%2eekl( sho2s include anal(sis of late%3reakin+ ne2s1 updates on ke( technical13usiness and re+ulator( intervie2s1 and in%depth intervie2s 2ith the ke( people

drivin+ the ne2 di+ital econom(. Lets Talk Bitcoin offers sponsors an attractive2a( to reach a tar+eted and savv( audience.


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lar+er point. 9e +et these re>uests sometimes from people 2ho have alternativecr(ptocurrencies and , dont reall( kno2 2hat standard 2e should 3e settin+ for2hen 2e should accept somethin+ for donations for the sho2. Because1 on the onehand1 the(re not reall( 3u(in+ an(thin+ from us and the( 2ant to donate tosupport 2hat 2ere doin+1 3ut on the other hand1 its definitel( a marketin+ move

on their part 2here the( 2ant us to sa(1 9e accept this.; Then1 that adds to theutilit( of their...so1 its not like its a selfless thin+. ,m 2onderin+1 2hen (ou +u(sare lookin+ at 2hat ne2 alternative cr(ptocurrencies to pa( attention to or tosetup a 2allet for1 2hat are the criteria that (ou useI

'$: Thats such a +reat >uestion. , 2ish , could sa( , actuall( had some hard andfast criteria. ,ts more like1 , have to see it 3ecome a 3lip on m( radar more than acouple of times. , made a fortunate investment in Litecoin a3out a (ear a+o 2hichended up doin+ reall( 2ell1 3ut ,m kind of skeptical a3out a lot of the othercr(ptocurrencies especiall( since no2 there are so1 so man( of them andAltcoin; reall( has to differentiate itself to stand out in the current climate. ,

?ust dont kno2 if 2ere at the point 2here thats reall( likel( to happen (et and ,cant see the clear leaders in the pack. , havent 3een super1 super 3uKKed a3outaltcoins latel(1 e=cept for ma(3e1 ma(3e Litecoin1 3ecause it seems to havecleared a certain 3ar. As far as acceptin+ donations to the sho21 , 2ish there 2asan eas( 2a( (ou could have a multi%currenc( 2allet. , kno2 people are 2orkin+ onthat 3ut , dont kno2 of one that e=ists (et. ,f 2e could have that1 it 2ould 3eeas( to administer. 9e could ?ust have a 2allet and 2hen some


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'$: But does that mean the( dont have an( valueI , mean1 , dont think so. , thinkthere could 3e some

AA: The( have dump value.

'$: eah1 the( have dump value 3ut , dont kno21 theres part of me, kno2 , ?ustsaid that ,m not like1 super1 super e=cited a3out an( of the altcoins 3ut there is apart of me that kind of sees like1 /ka(1 like1 (eah theres some Primecoin1 itsfun in prime num3ers and PPcoin1 its +ot the proof%of%stake and uire me doin+ research on them and do 2e convert them to Bitcoin1and essentiall( cash out1 or do 2e han+ on to themI; and that decision feels

over2helmin+ and 2e ?ust dont 2ant to deal 2ith it. Could that 3e sort of 2hats+oin+ onI

AA: ,ts enou+h to make that decision 2ith Bitcoin.

ABL: Lau+hin+!

'$: Lau+hin+!

AA: Lau+hin+! % ou kno2I

'$: i+ht1 ri+ht.

AA: 9ere runnin+ multiple sho2s ?ust to decide if 2ere holdin+ Bitcoin or 2hateven the value of Bitcoin is. , think1 then1 multipl(in+ that 3( a 2hole set of othercoinsit can reall( 3e a hu+e headache for merchants. 'o1 its easier than adoptin+multiple


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'$: The feather that 3roke the camels 3ack. Lau+hin+!

ABL: Lau+hin+! " eah1 e=actl(. es1 e=actl(. 9hen , run three of them at onceits all fine1 3ut 2hen , run four of them , tend to +et some insta3ilit( in m(s(stem. , see a couple of 2a(s for2ard on this. , can either see settin+ up a 3ount(

s(stem 2here 2e have a minimum value threshold 2here people can send their2hatever%coin%it%is to an escro2 address that 2e have setup and at the point that2e reach 2hatever the threshold is1 sa( its like1 one Bitcoin 2orth of 2hateverthe altcoin is that 2ere talkin+ a3out. Then1 2e +o throu+h the trou3le of settin+up a full 2allet for the sho2 and doin+ all that stuff or , could also see uspartnerin+ 2ithor it 3ein+ a service thats provided 3( an e=chan+e like8ircure=1 2here the(re alread( dealin+ 2ith all of these altcoins % and the( deal2ith a lotof altcoins. As a result of that1 the( could essentiall( +ive us anapplication that 2ould let people send somethin+ to a sho2 account that 2ould 3ea3le to 3e denominated in an( of those thin+s and then1 2ed have the a3ilit( tochan+e it into other cr(ptocurrencies or keep it in that 3ut not have to maintain

all of the 2allets on a series of actual computers that 2e have to control.

'$: i+ht1 3ecause the e=chan+es ri+ht no21 like BTC%E or 8ircure=1 the( do sortof have multi%currenc( 2allets 2here (ou can lo+ in and see (our finances and ithas a 2allet for each of the altcoins thats on that e=chan+e and people1 (oukno21 (ou can send funds to it or 2hatever. Then1 (ou can easil( trade 3ecausethe(re alread( in the e=chan+e. , +uess , see a pro3lem 2ith storin+ the coins onan e=chan+e 3ecause thats 3asicall( a 2e3 2allet1 and the(re vulnera3le tohacks1 3ut , reall( like the idea of1 #e(1 lets have an address for each of thesecoins1; once 2e reach a certain threshold1 and , think one Bitcoin e>uivalent ofthose altcoins is a +ood threshold to have. Then1 2ell put that up as a donation

address. ,m all for1 like1 please1 if some3od( 2ants to +ive me mone(1 , 2ould liketo make it convenient for them to do that1 (ou kno2 2hat , meanI ,f someone2ants to support Lets Talk Bitcoin1 lets make it eas( for them to do that in2hatever 2a( the( 2ant to. ,m kind of errin+ on the side of1 eah1 lets put upan address for ever( coin1; 3ut , realiKe that mi+ht look a 3it cluttered potentiall(1on the 2e3site.

ABL: , dont think its a pro3lem 2ith the cluttered look. , ?ust think that there areso man( of these currencies that are +oin+ to fail 3ecause the( dont have ver(man( fundamental advanta+es to them and the( dont have(ou need somethin+.,t almost doesnt matter to a certain e=tent 2hat an+le (oure +oin+ to approach

the pro3lem of cr(ptocurrenc( from1 3ut (ou need to do somethin+ that isdifferentF 3e it ho2 (ou market it or 3e it ho2 (ou1 (ou kno2the innovations ofthe currenc(1 fundamentall(1 itself. ou still need to have those differentiationsand , feel like a lot of those currencies that are out there1 its ver( difficult tomake that claim to. Be(ond that1 , dont think that its 2orka3le1 'tephanie13ecause 2ere talkin+ a3outtheres more than O cr(ptocurrencies out thereri+ht no21 and , have to ima+ine that thats +oin+ to continue to e=pand.


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'$: i+ht1 a3solutel(1 3ut , mean 2ere onl( +ettin+ donation re>uests for ma(3e1ten of those1 ri+htI

ABL: i+ht no2. Lau+hin+!

'$: Lau+hin+!

ABL: i+ht no21 (ou kno21 2hile 2e acceptthis1 of course1 3rin+s me to theother part of this conversation. 9e started acceptin+ Litecoin donations , +uessa3out three months a+o and the first couple of sho2s 2ere prett( successful and ,can look 3ack and actuall(1 sho2 and sho2 7 2ere t2o of our hi+hest%tippedsho2s 3ecause 2e +ot sin+le donations of litecoins to each of those sho2s.That actuall( 2as more su3stantial than the Bitcoin donations1 at that point. 'incethen1 2e +et pro3a3l( 3et2een .O% litecoin per episode on a +ood episode1 andsometimes 2e dont +et an( litecoins. 'o1 the >uestion 3ecomes1 is there aminimum threshold 3e(ond 2hich 2e should not 3e +eneratin+1 , should not 3e

spendin+ the time to +enerate the addresses to run the client if 2ere +ettin+these small amountsI 'hould there 3e a minimum thresholdI

'$: $a(3e1 2e dont have an individualBitcoin1 Litecoin1


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9indo2s and then1 the ne=t post 2as1 es1 complete 2ith 2allet%stealin+ Tro?anfree of char+e.; 'o1 2ere not there (et.

AA: B( the 2a(1 thats one of the disadvanta+es1 ri+htI ,f (ou solve the ke(%mana+ement pro3lem 3( t(in+ all the ke(s to a sin+le private ke( then1 if (ou lose

that one1 mmm%hmmm1 (ouve lost all of them.

'$: i+ht. Adam1 ma(3e 2hat 2e need is an! altcoin%enthusiast treasurer for LetsTalk Bitcoin and , 2ould 3e happ( to 3e that. 9h( dont 2e ?ust have ever(3od(send their altcoins to m( 2allet on 8ircure= and ,ll 3e the administrator of that.

ABL: /ka(.

'$: -o1 ,m ?ust kiddin+ a3out that 3ut

ABL: 0ltimatel(1 if its not (ou doin+ it1 its me1 'tephanie. es1 to a certain

e=tent1 theres a little 3it less trust1 , +uess1 3ut it doesnt reall( matter.

AA: eah1 ,d like to also start considerin+ takin+ other forms of pa(ment as 2ellso , 2ill 3e the treasurer for 3eer and pot and1 uh

ABL: Lau+hin+!

'$: Lau+hin+!

AA: , 2ill convert those in m( di+estive s(stem.

ABL: Thank (ou1 Andreas. Thank (ou ver( much.

AA: oure 2elcome.

'$: #as an(3od(actuall(1 thats a +reat point. #as an(3od( ever offered todonate ph(sical stuff to Lets Talk BitcoinI $a(3e other thin+s like +old1 or silver1or stocks1 or , mean1 , kno2 some or+aniKations have offers of those 3ut 2erehavin+ the pro3lem 2here1 #e(1 take m( altcoins1; ri+htI

ABL: eah1 no1 2e havent1 uh1 theres 3een no ph(sical offers1 (et. ,ts 3eenaltcoins and a+ain1 the other thin+ a3out altcoins of course1 is that its not ?ust a

donation. ,ts a donation 3ecause the( 2ant to donate to us 3ut the( 2ant us tocare a3out the cr(ptocurrenc(. Thats the fundamental thin+. ,ts not like the(redonatin+ 3ecause 2ere the 3est people in the 2orld. The(re donatin+ 3ecausetheres an advanta+e if 2e +et interested in it and start talkin+ a3out it 2ith ouraudience. 'o

AA: ou mean like1 spendin+ ten minutes talkin+ a3out


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ABL: E=actl(. Lau+hin+!

AA: eah.

ABL: E=actl(1 theres a reall( fine line to 2alk here1 , think. ,m ?ust not sure ho2

to approach it1 (et.

'$: 9ell1 , dont kno2 if 2eve resolved an(thin+ 2ith our on%air meetin+ 3ut itsa +ood pro3lem to have1 ri+htI People are offerin+ us donations like1 (eah1 thats+reat. Even if theres strin+s attached to it1 even if the( 2ant us to promote theircoin or 2hateverF /ka(1 fine1 ,ll take (our mone(1 ri+htI Lau+hin+!

ABL: Lau+hin+! "

Documents

Let's Talk Bitcoin, episode 46, "Life in the Cloud"